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Three ways people analytics can fix the biggest compensation problems

In recent years, advances in people analytics have brought the topic to the forefront of the business world. People analytics experts are expanding the application of data analysis to the workforce every day and pushing the limits of what has previously been possible. It’s helping HR Executives migrate their traditionally tactical Human Resource functions into a strategic, data-driven decision-making area.

People analytics experts are finding new ways to use data to make better decisions within the Human Resources function to drive value to the bottom line and increase employee satisfaction. Engaged, high-performing talent is a prerequisite to achieving any other business aim. The problem is, HR leaders and managers typically rely on guesswork to assess employee happiness. Lacking data-driven insights can lead to high attrition rates and higher turnover costs. 

New technologies have emerged to help companies manage multiple aspects of compensation management. Previous versions of compensation applications were centered around goal management and alignment. These technologies have progressed to include a valuable suite of data analysis features. In expert hands, this data can be used to create several benefits for enterprise organizations.

People analytics enable smarter compensation planning

Making sound compensation decisions across an organization is a challenge. At a time when organizations commit to tackling diversity and inclusion, they need to carefully consider whether they’re effectively dealing with gender pay gap, racial equality, or ageism in the workforce, and not letting compensation bias stall HR progression. Whether deliberate or unintentional, biases that lead to unfair compensation practices can have catastrophic effects on an employer’s brand.

One in three (34%) U.S. workers don’t believe their pay is based on their performance, experience or skill set, but on what their manager or supervisor feels they deserve to make. For companies that want to commit to more transparent practices around pay, they must first determine if compensation bias exists, which may be no easy task. When raises are granted in spreadsheets that lack checks and balances or salary pools are distributed solely at a manager’s discretion, it can be nearly impossible to determine if manager bias exists in compensation. 

Investing in digital tools—like compensation software powered by AI and predictive analytics—will help show employees how their performance contributes to their pay and what their financial growth trajectory looks like long-term. It is the availability of compensation information across the enterprise that allows managers and HR to make better and more equitable decisions.

People analytics help to assess pay equity

In only the last few years, pay equity has seen a global surge in awareness and action with 93% of businesses saying they are now taking action to close the gender pay gap and increase diversity in their workforce. Legislation supporting equal pay, such as the mandated reporting of gender pay gap in the UK, doesn’t actually measure pay equity, and companies need much more detailed data to conduct accurate pay fairness assessments.    

Much of the data required for an accurate assessment of pay equity, such as base salary, bonus structures, job classes, and performance values, reside inside compensation applications. Statistical procedures in combination with compensation analytics, reveals the true compensation picture that can be communicated to the public.

Transparency increases employee motivation

When organizational goals are aligned throughout the levels of the organization and made visible to all employees, employees have a better understanding of what the company is trying to achieve. With visibility into how team objectives impact compensation throughout the organization, employees will feel a sense of fairness and unity with their fellow employees.

It takes implementing true total rewards-focused technology to support pay fairness. This technology is necessary to give HR and management insight into how pay is distributed throughout the company and how it correlates to gender, race, and other factors. In addition, total rewards management technology can allow HR leaders and managers to further uncover gaps by comparing internal pay data to external benchmarks.

When the decisions you make are fair, market-based, and transparent, the natural result is loyalty and motivation. Organizations that position themselves as leaders in the movement will be better able to attract and retain the next generation of workers.

Get the tips you need to develop programs to effectively attract and retain talent for years to come with our survey report: Employee Expectations in Hiring.

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